Comcast's NBCUniversal Deal Proves Merger Boom

NEW YORK ( TheStreet) -- Comcast ( CMCSA - Get Report) is buying a remaining 49% stake in NBCUniversal from General Electric ( GE - Get Report) for $16.7 billion, in a move that's pushing both companies' shares to new highs.

While the deal shouldn't be a major surprise to investors in either Comcast or GE after both companies first formed the NBCUniversal joint venture in 2009, it does come earlier than expected and raises the value of the venture by $1.6 billion. More importantly, the move and similar large-sized deals may indicate that the boom in corporate mergers is more than a fleeting trend.

Consider that earlier in 2013, Morgan Stanley ( MS - Get Report) surprised investors by announcing a plan to take full control of a similarly structured brokerage joint venture it formed with Citigroup ( C - Get Report) in 2009. The stake buy-ins could also be taken as a sign of growing confidence from acquirers and the improving performance of JV-targets.

Given NBCUniversal's cash flow generation and the cost of financing in current markets, it appears Comcast believes accelerating the JV buy-in could actually deleverage the company in short order.

Meanwhile, Dell ( DELL) is in the midst of what could be a post-crisis record leveraged buyout deal -- which could increase in price -- and cable TV conglomerate Liberty Media ( LBTYA) recently announced an agreement to buy Virgin Media ( VMED) in a stock deal worth roughly $16 billion.

It's no coincidence that C-Suites at the likes of Comcast and Morgan Stanley are eager to take control of ventures cut in the wake of the financial crisis as competitors try to rationalize their operations and deliver shareholders tangible asset value.

Recovering share prices, booming debt markets and an increasing appetite by banks to provide merger or buyout financing appear to be adding fuel to those animal spirits.

In Tuesday's deal, Comcast will be buying up General Electric's 49% stake in the NBCUniversal venture both companies cemented in 2011, while also buying up GE's iconic 30 Rock building and the New Jersey headquarters of CNBC for $1.4 billion. Comcast will fund the deal using $11.4 billion in cash, in addition to debt and the issuance of new stock.

The deal, announced in Comcast's fourth quarter earnings, also comes with strong results from the cable giant that includes a 20% boost to its dividend and an authorization to repurchase $2 billion in stock in 2013.

"I am really pleased to report strong results for the 4th quarter and the full year of 2012 and delighted that we are able to accelerate the acquisition of General Electric's 49% common equity interest in NBCUniversal while also having the financial strength to return capital to shareholders," Brian Roberts, chairman and CEO of Comcast said in a statement released with earnings.

"To underscore our confidence, we are increasing our dividend by 20% and plan to and plan to repurchase $2 billion of our stock this year.

Separately, GE said the stake sale and a divestiture of real estate assets will cause accounting gains of $1 billion for the parent company and $900 million for GE Capital the industrial conglomerate's financial services arm.

"GE will receive $12.0 billion in cash, $4.0 billion in Comcast guaranteed debt, and $0.7 billion of preferred stock," GE said in a statement Tuesday. In total GE is selling $18.1 billion in assets, when real estate assets are included.

"This transaction allows us to significantly increase the cash we plan to return to shareholders in 2013, to approximately $18 billion, and to continue to invest in our industrial business," Jeff Immelt, GE Chairman and CEO, said in a statement. GE is now authorized to repurchase $35 billion in stock, with plans to buy back $10 billion in shares this year.

For Comcast, taking control of NBCUniversal will complete its transformation from a content distributor by way of cable and broadband networks to a fully-integated media behemoth that also owns top broadcast, cable TV, film studio and theme park assets.

Such a move continues to differentiate Comcast from cable peers, while putting it into closer running with content creators like Disney ( DIS), CBS ( CBS) and Time Warner ( TWX).

The deal may also reflect improving operating results that make a large stake acquisition opportunistic given expectations of continued growth.

"We are excited about the future prospects of NBCUniversal," Roberts said on CNBC. "Our shareholders have 100% of the upside here," he added.

Such sentiment mirrors similar commentary from Morgan Stanley chief executive James Gorman in explaining a far faster-than-expected planned acquisition of the bank's brokerage joint venture with Citigroup.

"After a year of significant challenges, Morgan Stanley has reached a pivot point. We demonstrated meaningful progress in our Wealth Management Joint Venture, reaching the highest pre-tax margin since the inception of the JV," Gorman said, in January.

In fourth-quarter earnings, Morgan Stanley also showed long overdue progress on the brokerage unit's profitability. Net revenues were $3.5 billion and pre-tax margin rose to 17%, far above the 10% that had raised some investor and analyst alarm in past quarters. When the brokerage JV was cut, Morgan Stanley forecast 20% margins.

On news of the deal, Comcast shares rose over 7% to $41.71 in after-hours trading, a new record high for the company. General Electric shares gained nearly 3% to $23.21, reaching a five-year high in after-hours trading.